Capital Ideas

---Shares

March 5, 1997

Perhaps the most important thing to remember about start-up
capital is that it doesn't all have to come from a single
source. Successful entrepreneurs often tap a variety of financial
sources to help make their dreams come true. These include:

*Current salary. Squirrelling away portions of your paycheck
today can help fund your own business tomorrow. If you're
already past the planning stage and are ready to launch your new
venture, consider moonlighting, or cutting back your full-time job
to part-time to ensure you'll have some steady funds rolling in
until your business begins to soar.

*Friends and relatives. Think about borrowing the start-up
funds you need from close friends and loved ones. If you do, be
sure to put everything (interest, terms of repayment, penalties) in
writing to avoid damaging personal relationships, in case something
inadvertently goes wrong. Borrowing money from people you know
typically results in lower (or no) interest rates.

*Bank loans. Entrepreneurs typically find banks reluctant to
finance start-up ventures. The key to obtaining small-business bank
loans frequently involves getting the loan guaranteed by the Small
Business Administration (SBA), which assures the bank making the
loan that it will ultimately be repaid. You should be aware,
however, that the SBA is more likely to guarantee a loan for
someone who has been in business awhile than for someone just
starting out.

*Home equity loans. The key to obtaining a home equity loan,
clearly, is actually owning a home of your own so you can borrow
money on the part of the mortgage that you have already paid off.
The bank will either provide a lump-sum loan payment to you or
extend a line of credit based on the equity in your home.

*Retirement funds. If you've got money stored up in a
retirement savings plan offered by your employer, you may be able
to get your hands on some of it in the form of a loan. Consult the
plan's documentation to see if this is an option. If it is,
you'll likely be allowed to borrow up to half of the amount you
have in the plan.

*Credit cards. Because of the high interest rates (often 18
percent or more) associated with them, credit cards are not an
ideal source of start-up capital in all situations. But if you need
to get your hands on some instant cash for equipment or inventory,
and expect fairly immediate financial returns so you can pay off
their balances quickly, credit cards can turn out to be quite handy
in moments of need.